Between trying to save for financial goals and paying down debt — the last thing many of us want to do is file our tax return. Many of us feel overwhelmed when it comes to our finances but tax time has a way of increasing those stress levels tremendously.
The fact is, taxes aren’t taught in school. I don’t remember learning about them until I received my first paycheque and saw money deducted off of it. Here I was thinking that I would get to keep the entire $7.40 per hour that I had worked so hard to get!
Now over a decade later, I understand the ins and outs of tax as a CPA and tax specialist, although I still find the lingo incredibly confusing. I find myself falling down the rabbit hole on the CRA website, not quite sure where I started and not even sure of my end game. I can’t imagine how overwhelming the Income Tax Act must be to the average Canadian and that’s why I’m writing this blog.
There’s no getting around it: your taxes are important. While they may seem boring, they can be the key to getting money back in your bank account (should you find yourself in a refund position) and give you the ability to qualify for many benefits the government provides. Even if you don’t make very much, or owe anything, it’s so important to file your return each year. Yes, taxes can be scary, but these tips can help.
How to make your tax return less scary1. Organize everything
One of the biggest reasons tax season can be so overwhelming is the number of pieces of paper you receive in the mail. Most people have no idea what to do with them, and because you only receive them once a year, it’s easy to forget what came last year. Create folders for the papers that come this will help you keep those papers organized.
You might try something like this:
– Any piece of paper that starts with the letter T. Your program will help guide you through where to put these and what boxes need to be entered.
– If you contributed to your RRSP in the year or the first 60 days of the current year, you may be able to lower your tax bill with RRSP contributions.
– Provided you meet the threshold, you will be able to include your medical expenses on your tax return. This threshold is based on your income, so keep your receipts, input them into your tax filing program and it will calculate how much you can use to lower your bill.
Business or Side Hustle Income and Expenses
– It’s important to include all income earned (tips, babysitting, Bitcoin) as it’s illegal not to include all the income you’ve earned on your return. Expenses that were incurred to earn business income can be deducted, so keep those receipts too.
– Anything else that looks like a tax slip goes here.
Related: Should you pay off your taxes with a personal loan? 2. Find a volunteer tax clinic
If you’re low income, there are many organizations that provide free tax filing software and help. Universities are a great place to look for these clinics, and chances are if you’re just starting out this could be a great resource for you. In addition to getting some guidance about how to file your tax return and ensure that everything is in the right place, you may qualify for benefits or refunds you didn’t know you were entitled to.3. Complete a slip check
Back in the olden days (2012), you used to have to call in and have a CRA representative tell you which tax slips they had on file. This would allow you to compare these slips to the ones you received in the mail to make sure you weren’t missing any. While I’m sure you can still call them, it’s much faster and far less painful to log in to your CRA online account and check which slips they have on record. If you’re missing one in your pile you can easily download it and save it your desktop, or if you’re using online software, automatically load it into the program. This will ensure you don’t miss anything when you’re filing.4. Start early
While your return isn’t due until April 30th, a great way to reduce your stress is to start looking at them and filing them as early as possible. It can be easy to procrastinate a task you don’t want to do, but waiting until April 29th to start them is only going to cause stress in the long run. Start early so that you have time to ask questions and ensure everything is in the right place.
If you don’t have enough funds to pay your taxes, a low-interest personal loan may be a suitable option. Check your credit score for free with Borrowell to see what loan options you could qualify for.
Check My Rate 5. Utilize paid services
Don’t feel like dealing with the stress or have a more complex tax return situation? Be sure to seek professional help. All of us have different financial goals and budgets and it’s up to you to decide if a paid service will make your life easier.The bottom line
At the end of the day, filing your tax return needs to happen each and every year. Getting ahead is important. It will allow you to seek help if you need it and get organized if you owe the government money.
Many people get scared when they see that they owe money, but in reality, it can be a positive thing. It means you didn’t overpay in taxes during the year. If you find yourself in a situation where you owe more than you can afford to pay, call the CRA and explain your situation, or look into a low-interest personal loan. Speaking with the CRA doesn’t have to be scary, and if you get after your taxes, you’ll feel good, and know a little bit more about how our taxation system works.
Related: Can my taxes affect my credit score?
About the Author
Janine Rogan is a CPA and personal finance writer from Calgary, Alberta. She is a passionate millennial sharing her wealth of financial knowledge with Canadians. Janine has run numerous workshops, spoken at dozens of conferences, and written over 600 articles relating to personal finance. Janine hopes to empower Canadians to take control of their finances and live a value based life. More articles by Janine can be found on her website.